Section 5552 - [Operative 4/1/2025] Tax Credit Allocation(a) In each fiscal year beginning with the 2025-26 fiscal year and ending with the 2029-30 fiscal year, the CFC shall allocate tax credits to qualified motion picture projects produced by eligible California Film and Television Tax Credit Program 4.0 applicants in two or more allocation periods publicized as specified in section 5553(a) of this article.(b) The amount of tax credits allocated to a qualified motion picture project shall be based on a percentage of the qualified expenditures provided in sections 17053.98.1(a)(4) and 23698.1(a)(4) of the Revenue and Taxation Code, as follows: (1) Twenty percent (20%) of the qualified expenditures attributable to a qualified motion picture project category listed in subparagraphs (A), (D), (E), (F), and (H) of section 5551(b)(1) of this article.(2) Twenty-five percent (25%) of the qualified expenditures attributable to a qualified motion picture project category listed in subparagraphs (B), (C), and (G) of section 5551(b)(1) of this article.(c) If all tax credits have been allocated for any application period, qualified motion pictures shall be placed in a prioritized waiting list according to their project type and in the order of their jobs ratio ranking until one of the following occurs: credits become available that allocation period, the production elects to be removed from the queue, the production starts principal photography in California, or until the allocation period ends.(1) In the event that a partial tax credit allocation is available for the highest ranked project on a waiting list, the CFC shall offer that tax credit allocation to the waitlisted project if it amounts to or exceeds fifty percent (50%) of the waitlisted project's total eligible tax credit allocation amount. (A) A waitlisted project that rejects an offer of a partial tax credit allocation shall keep its place on the waiting list within that allocation period. A waitlisted project that rejects an offer of partial tax credit allocation shall remain eligible to apply for credit allocation for the same project in any future allocation period for that project category, provided it has not commenced principal photography and continues to fulfill all applicable program requirements.(B) If the highest ranked project on a waiting list rejects the offer of a partial credit allocation and elects to be removed from the queue, the CFC shall offer the credits to the next project on the waiting list in accordance with the percentage rule in paragraph (1) above, and so on until the available tax credits are exhausted or amount to less than fifty percent (50%) of the total eligible tax credit allocation amount for the next project on the waiting list.(d) If the applicant is producing a series of feature films that will be filmed concurrently and the series of films continues the narrative of the original work and financing is confirmed, then the CFC shall have the authority to divide the allocation over multiple fiscal years if it is determined that the production schedule occurs over more than one fiscal year.(e) Tax credits for a feature film, new or recurring television series, relocating television series, pilot, or miniseries/limited series shall be applied to a maximum of one hundred million dollars ($100,000,000) of the qualified expenditure budget. There shall be no maximum on the production budget. (1) A one hundred million-dollar ($100,000,000) qualified expenditure maximum applies to the five percent (5%) augmentation as per section 5552(h) (1-3).(2) A one hundred million-dollar ($100,000,000) qualified expenditure maximum applies to the ten percent (10%) augmentation as per section 5552(i)(1).(3) A one hundred million-dollar ($100,000,000) qualified expenditure maximum applies to the five percent (5%) augmentation as per section 5552(i)(2) with respect to a relocating television series.(f) Tax credits for an independent film shall be applied to a maximum of ten million dollars ($10,000,000) of the qualified expenditure budget. There shall be no maximum on the production budget.(1) A ten million-dollar ($10,000,000) qualified expenditure maximum applies to the five percent (5%) augmentation as per Section 5552(i)(2).(g) Pursuant to sections 17053.98.1(g)(3)(D) and 23698.1(g)(3)(D) of the Revenue and Taxation Code, except in the case of a qualified motion picture that is an independent film with a qualified expenditure budget of ten million dollars ($10,000,000) or less, the CFC shall for informational purposes include on each Credit Allocation Letter (CAL), Form D4 (January 1, 2025), hereby incorporated by reference, issued for the California Film and Television Program 4.0 the total sum of allocated credits for a qualified motion picture project and the sum that equals ninety-six percent (96%) of the total sum of allocated credits, including uplifts. (1) An applicant that opts in to the diversity provisions detailed in sections 5553.3 and 5554.2 of this article and meets or makes a good-faith effort to meet the goals in its diversity workplan shall be eligible for tax credit certification of the full amount, subject to verification and audit, pursuant to sections 17053.98.1(g)(3)(D) and 23698.1(g)(3)(D) of the Revenue and Taxation Code.(2) An applicant that opts out of the diversity provisions outlined in sections 5553.3 and 5554.2 of this article or that does not meet or make a good-faith effort to meet the goals in its diversity workplan shall be eligible for tax credit certification of the sum that equals ninety-six percent (96%) of the total sum of allocated credits, including uplifts, subject to verification and audit, pursuant to sections 17053.98.1(g)(3)(D) and 23698.1(g)(3)(D) of the Revenue and Taxation Code.(3) The one hundred percent (100%) sum is the sum that shall be referenced for purposes of establishing the maximum sum of allocated tax credits for a subsequent season of a television series and the sum that shall constitute the basis of calculation for an applicant's Career Pathways Program contribution.(h) For purposes of this section, a five percent (5%) augmentation ("uplift") to the tax credit allocation for non-independent motion pictures (excluding relocating television series) shall be made by the CFC when any of the following conditions have been met: (1) The production company pays or incurs qualified expenditures relating to qualified visual effects work totaling a minimum of ten million dollars ($10,000,000) in California or at least seventy-five percent (75%) of total worldwide visual effects expenditures are incurred in California.(2) The production company pays or incurs qualified wages for services performed outside the Los Angeles zone during the applicable period relating to original photography outside the Los Angeles zone by individuals who reside within the Los Angeles zone. The foregoing amounts shall be substantiated by documentation including, but not limited to, timesheets and payroll records as requested by the CFC pursuant to section 5555(e) and/or the CPA performing the Agreed Upon Procedures (AUP; January 1, 2025), hereby incorporated by reference.(3) The production company purchases or leases tangible personal property outside the Los Angeles zone during the applicable period and the personal property is used or consumed outside the Los Angeles zone. Tangible personal property must be purchased, rented or leased from an outside of Los Angeles vendor through an office or other place of business outside the Los Angeles zone. Rentals or purchases from a pass-through business do not qualify for the five percent (5%) augmentation. (A) If the tangible personal property purchased or leased outside the Los Angeles zone was not completely used or consumed solely outside the Los Angeles zone, the production company shall apportion amounts paid or incurred for tangible personal property outside the Los Angeles zone during the applicable period by multiplying these non-wage outside the Los Angeles zone expenditures by the ratio of days of principal photography outside the Los Angeles zone to the total number of days of principal photography.(B) If the tangible personal property purchased or leased outside the Los Angeles zone was completely used or consumed solely outside the Los Angeles zone, and the production company wishes to seek an uplift based on out of zone consumables, the company shall substantiate that with its records. Tangible personal property purchased or leased outside the Los Angeles zone shall be deemed to be completely used or consumed provided the property was of a type or nature such that it would have no residual material value remaining after its use or consumption outside the Los Angeles zone. Examples of such property include, but are not limited to, food and catering items, rented hotel or corporate housing usage, construction supplies and materials for sets, automotive or other fuels, security services, location and stage services, government permit fees, personnel services, printing, equipment rentals for the applicable period outside the Los Angeles Zone, transportation services, dry cleaning, and shipping and travel costs from within the state to and from the out of zone location.(i)(1) For the purposes of this section, a ten percent (10%) augmentation ("uplift") to the tax credit allocation for non-independent motion pictures (excluding relocating television) shall be made by the CFC if the production company pays or incurs qualified wages for services performed by local hire labor outside the Los Angeles zone during the applicable period relating to original photography outside the Los Angeles zone. The foregoing amounts shall be substantiated by documentation in accordance with paragraph (3) below.(2) For the purposes of this section, a five percent (5%) augmentation ("uplift") to the tax credit allocation for an independent film or a relocating television series in its first season in California shall be made by the CFC if the production company pays or incurs qualified wages for services performed by local hire labor outside the Los Angeles zone during the applicable period relating to original photography outside the Los Angeles zone. The foregoing amounts shall be substantiated by documentation in accordance with paragraph (3) below.(3) The applicant is responsible for collecting proof of identity and proof of the location where the qualified individual resides for local hire labor at the time of hire and for providing copies to the CPA performing the Agreed Upon Procedures, Form AUP (January 1, 2025), hereby incorporated by reference. Without proof of identity and proof of the location where the qualified individual resides for a crewmember the Local Hire Labor Uplift shall not be applied for that individual. (A) Acceptable proof of identity is a California Driver's License, a State ID Card, or a Passport.(B) For purposes of sections 17053.98.1(a)(4)(E) and 23698.1(a)(4)(E) of the Revenue and Taxation Code, acceptable proof of the location where the qualified individual resides is a current home or apartment rental agreement, a utility bill, mortgage statement, internet or phone provider bill, renter's or homeowner's insurance bill, or equivalent document, issued within the previous three months.(j) Any Recurring television series shall be given first priority for a credit allocation during an open allocation period in each subsequent year in the life of that series whenever credits are allocated and available within a fiscal year. (1) A recurring television series shall submit a new application for each season during any open television project application period as specified by the CFC in its written notification. (A) The application for a season of a recurring television series shall reflect the estimated qualified expenditures of that specific season, however, the tax credit allocation will not exceed the amount allocated in the credit allocation letter(s) issued for that series in the previous fiscal year or the most recent fiscal year in which a credit allocation letter or letters were issued for that series.(B) If a pick-up order for the season is available at the time of application, it must be submitted.(2) The allocation amount requested by a relocating television series applying for tax credits in subsequent fiscal years as a recurring television series shall not exceed the amount allocated in the credit allocation letter(s) issued for that series in the previous fiscal year or the most recent fiscal year in which a credit allocation letter or letters were issued for that series.(k) Revocation by the CFC of a tax credit allocation pursuant to this article is final and shall not be subject to administrative appeal or review.Cal. Code Regs. Tit. 10, § 5552
Note: Authority cited: Sections 17053.98.1(e) and 23698.1(e), Revenue and Taxation Code; and Section 11152, Government Code. Reference: Sections 17053.98.1(a), 17053.98.1(b), 17053.98.1(e), 17053.98.1(g), 17053.98.1(i), 17053.98.1(j), 23698.1(a), 23698.1(b), 23698.1(e), 23698.1(g), 23698.1(i) and 23698.1(j), Revenue and Taxation Code; and Section 14998.1, Government Code.
1. New section filed 12-17-2024; operative 4/1/2025 (Register 2024, No. 51).